Conviction vital, says Pictet’s fund selector

Fund selection at Pictet & Cie is the domain of Mussie Kidane, whose team covers a broad range of asset classes but is most drawn, he tells Peter Kenny, by conviction managers

Pictet & Cie, founded in Geneva in 1805, pioneered institutional asset management in the 1960s, and is now one of Switzerland’s largest private banks, with some $434bn assets under management and custody as of end Jume 2011.

Owned by eight managing partners who are personally liable for the bank’s commitments, it controls the entire chain of its operations and does not need the approval of shareholders in taking decisions.

The bank is clear about its core business, focusing solely on managing the wealth of private and institutional investors.

It does not engage in any form of investment banking and it does not issue any commercial, mortgage or unsecured loans.

The bank has over 3,000 employees working out of 20 financial centres around the world. Half the bank’s business is institutional asset management.

The tradition of the institution belies its innovative strategy, evident in acclaim for its environmental credentials, (its new headquarters in the emerging Geneva business district of Acacias combines ecological economy with state-of-the-art technology), as well as client service.

Mussie Kidane, head of Fund Selection at Pictet & Cie, leads a relatively small team of six, part of the investment platform of Pictet Wealth Management.

His main clients are investment professionals in charge of implementing the asset allocation decisions in client portfolios.

“We have billions of our clients assets invested in different funds, both managed within the Pictet Group or by third-party fund managers. This includes active, passive and exchange traded funds in major asset classes and geographical regions,” says Kidane, who grew up in Lausanne, and studied at the University of Geneva.

“My team and I focus on traditional third-party fund selection business. It’s dedicated to researching investment funds across all asset classes and geographical regions, with a primary goal of serving the needs of Pictet Wealth Management Unit globally. Our mandate is to find the best-in-breed active fund managers. We cherry pick each and every fund we recommend to our clients.”

His ‘master list’ has 47 funds managed by 40 different asset managers. “The list is concise in terms of the number of funds it contains and this is done on purpose. We want to have on this list only funds we have strong conviction about, and funds we are liable to actively use in client portfolios,” he explains.

The team also uses exchange traded funds to implement some of the tactical asset allocation decisions.

Although it does not conduct the usual fund due diligence per se, it undertakes detailed analysis to understand the DNA of these products and the risks associated with them.